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Sub-$800 PCs take bite out of US retailers' revenues

by Dominique Deckmyn in Silicon Valley

Most PC retailers in the US are feeling the sting of falling PC prices, but chipmakers AMD and Cyrix and retail PC giant Packard-Bell NEC are riding the wave.

New data from researcher PC Data suggests that retail sales of PCs are soaring: unit sales for November are up 31.7 per cent over November 1997. But the average PC price in retail has reached a new low of $992, down a stunning 26 per cent from November 1997.

Sub-$1,000 PCs, still a relatively new phenomena a year ago, now account for 58.5 per cent of retail sales, according to PC Data. PCs costing less than $800 accounted for exactly one third of all PCs sold at retail in November, according to the data.

Packard-Bell NEC appears to be riding the sub-$1,000 wave to stage a comeback from past performance slumps. The company grabbed 22 per cent of retail PC sales, second only to Compaq, which garnered 27.3 per cent. In the sub-$1,000 space, Packard-Bell NEC now holds a commanding 36.3 per cent market share.

To cut system costs, Packard-Bell NEC recently joined up with AMD and National Semiconductor?s Cyrix unit to offer systems based on their processors rather than on Intel?s higher-priced chips. A move that appears to be paying off.

In a remarkable reversal of the familiar ranking, AMD now leads the pack in processor sales to the sub-$1,000 market with a share of 37 per cent. National Semiconductor is number two with 30.1 per cent, and Intel lags in third position with 27.7 per cent.

However, Intel is expected to launch new models in its low priced Celeron family in early January, a move that is expected to be accompanied by stiff price cuts on its current models.

The $800 PC is not the endpoint of the PC price wars. eMachines of Fremont, California, a joint venture between Korean PC manufacturer Trigem and monitor maker Korea Data Systems, is currently shipping complete systems, without monitor, for $399 and $499.

Despite this good news for consumers in the US, prices for PCs remain significantly higher in Europe.